Thank you, and welcome to Udemy's Second Quarter 2023 Earnings Conference Call. Joining me today are Udemy's Chief Executive Officer, Greg Brown; and Chief Financial Officer Sarah Blanchard. During this conference call, we will make forward-looking statements within the meaning of Federal Securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated. For a complete discussion of risks associated with these forward-looking statements, we encourage you to refer to our most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. Our forward-looking statements are based upon information currently available to us. We caution you not to place undue reliance on forward-looking statements and we do not undertake and expressly disclaim any duty or obligation to update or alter our forward-looking statements except as required by applicable law. In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements prepared in accordance with U.S. generally accepted accounting principles referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe that these non-GAAP financial measures assist management and investors in evaluating our performance in comparing period-to-period results of operations in a more meaningful and consistent manner as discussed in greater detail in the supplemental schedules to our earnings release. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release. These reconciliations together with additional supplemental information are available on the Investor Relations section of our website. A replay of today's call will also be posted on the website. With that, I will now turn the call over to Greg.

Thank you, Dennis, and good afternoon to everyone on the call. Udemy delivered strong second quarter results. Revenue came in at more than $178 million, or a 16% year-over-year increase, and exceeded the high end of our guidance range. That growth was driven by a 36% year-over-year increase in Udemy Business revenue. On the bottom line, we delivered our first quarter of positive adjusted EBITDA as a public company, thanks to our continued focus on operational efficiencies and prudent expense management. We are proud of our team for their commitment and continued execution against our strategic initiatives, particularly as we navigate this unpredictable macroeconomic environment. While the current backdrop presents some near-term challenges, Udemy is well positioned to capitalize on meaningful long-term tailwinds for our business that are shaping the future of work. First, there is a profound transformation happening right now that impacts every industry: the rise of the skills-based organization; and second is the continued interest and application of generative AI across customers of all sizes. I'd like to take a few moments today to provide color on those trends. In conversations with enterprise customers across all industries and regions, the number one theme we hear from CEOs is that ensuring their workforce has the skills required to achieve their strategic objectives is a top priority. This represents a massive opportunity for Udemy to provide the necessary reskilling and upskilling that companies around the world will require for their workforce and that individuals need to stand out in the hypercompetitive job market. In addition, the accelerating pace of innovation means that organizations require support to establish learning strategies and objectives for their teams and also a way to measure and validate skills acquisition. While degrees will always have relevance, they do not validate the practical skills the individual has mastered, which can lead to qualified internal and external talent being overlooked. For this reason, forward-thinking organizations are shifting to a more skills-based approach. By focusing on skills, not just degrees, companies can vastly expand and diversify their talent pool to fill open roles as well as drive increased internal mobility by reskilling and upskilling existing talent. As companies shift from offline to online to reskill and upskill their workforce, they realize it is a more efficient and cost-effective solution that drives high ROI, boosts morale, and provides significant cost savings. To give you a sense of the size of the potential savings, a recent study found that the average per-employee spend on L&D by employers worldwide was approximately $1300 per head in 2021. The cost for one Udemy Business license starts at just $360 per year. As you can imagine, the cost savings for a global enterprise are meaningful. When companies embrace a culture of continuous learning, they future-proof their workforce. Demand for technical skills has never been higher, with nearly 90% of companies reporting skills gaps within their organization, and many executives believing that finding talent with specialized skills is a major challenge. L&D leaders must understand the skill level of their workforce, particularly within technology-focused areas. Yet one of their top concerns is that they do not have a reliable strategy for measuring the success of their learning programs. To help customers address this need, Udemy has introduced Badging as a part of its Integrated Skills Framework, a comprehensive skill-building approach for organizations. The framework will enable customers to keep pace with innovation through a series of exciting new offerings. Working with Udemy, organizations will be provided with a seamless way to quickly assess their current skills landscape and identify critical skills gaps. In addition, it provides employees with an effective way to acquire and demonstrate skill mastery through the acquisition of leading certifications and badges. At the core of our Badging program is Udemy's certification prep center. We have made it simple to discover curated learning paths, including labs and assessments to help professionals prepare for certification exams and badges. This will enable learners to validate mastery of in-demand skills such as AWS, Azure, CompTIA, and more. As of today, our catalog includes certification preparation for nearly 200 highly sought-after and reputable badges across more than 160 certification topics and nearly 30 subject areas. The other meaningful tailwind is the evolution of generative AI and its ability to accelerate change across all industries and geographies. Professional learners recognize the importance of understanding how generative AI will impact their role and how they can leverage these technologies to be more effective or to land their next job. On the enterprise side of our business, customers across all industries are asking Udemy to help them develop AI and digital transformation strategies to become more agile, durable, and competitive. The level of engagement on our platform related to this topic is unprecedented. In the seven months since ChatGPT was launched, Udemy has seen more than 1.4 million enrollments in the more than 1,000 courses available on the topic on our platform. Taking that a step further, the number of minutes consumed for ChatGPT-related content during Q2 increased nearly 300% from the prior quarter. This is a clear indication that people recognize the importance of understanding this technology and are discovering that they can receive high-quality skills training via Udemy. During the past few months, we have continued to invest in further integrating generative AI throughout our platform. We are committed to delivering products and features that support instructors with content generation, deliver more personalized learning experiences, and help organizations identify and address skills gaps. On our last call, we shared plans to roll out new smart search capabilities, which is one of the several enhancements that leverage the power of generative AI to provide learners with more personalized, bite-sized learning experiences. Subsequent enhancements will include skills-based guidance that automatically recommends Udemy learning paths based on defined objectives, including badge acquisition and certification. In addition, we began to incorporate generative AI into our reports for our cohort learning solution, Leadership Academy, to provide admins with increased visibility into learning outcomes. We have also introduced further automation into the generation of these reports to speed up time to value and ensure leaders can access the right data as soon as they need it. Our investments in generative AI are expected to provide meaningful tailwinds for learner demand, enhance personalized learning, deepen our customer relationships, and further accelerate the pace at which we can add new relevant and immersive content. You can expect to hear more updates over time on how we are leveraging this exciting technology. As you can see, we believe that these trends—the rise of skills-based organizations and generative AI—will continue to increase in importance and are expected to present significant opportunities for our business. As companies embrace a culture of continuous learning with the goal of future-proofing their workforce, we believe demand for Udemy will continue to grow. Before I turn the call over to Sarah, I'd like to highlight that we've significantly strengthened Udemy's board and leadership team with three seasoned professionals who will further develop our strategic vision and help scale our business globally. First, we welcome Sohaib Abbasi as Independent Board Chairman. Sohaib brings more than 30 years of deep enterprise software and strategic leadership experience, including more than 10 years serving as CEO of Informatica. We also recently bolstered our executive leadership team with two newly created positions. First, we appointed our Chief Marketing Officer, Genefa Murphy, who brings extensive experience leading marketing initiatives for fast-growing software and technology companies. And second, we added a Chief Product Officer, Prasad Raje, who brings a wealth of enterprise SaaS product experience to Udemy. I'm very proud of the world-class executive leadership team that we have built as we heighten our focus on driving results at every level of the organization. We look forward to Sohaib, Genefa, and Prasad's contributions as we take Udemy to the next level and continue to lead the transformation to a skills-based economy. Now I'll turn the call over to Sarah for a financial review.

Thank you, Greg. I'll focus my comments on the key financial highlights and then provide our outlook for Q3 and full year 2023. You can find the complete set of financial tables in our news release, which is available on our Investor Relations website. As Greg mentioned at the outset, we delivered solid Q2 results. Revenue increased 16% year-over-year to $178 million and exceeded the high end of our guidance range by $4 million. The year-over-year growth included a negative impact from foreign exchange or FX of 3 percentage points. Our Enterprise segment or Udemy Business drove our total revenue growth, delivering revenue of $102 million or an increase of 36% year-over-year. Included in the growth was a 3 percentage point headwind from changes in FX rates. This is a major milestone for Udemy, as it was our first quarter delivering more than $100 million in Udemy Business revenue. We ended the quarter with annual recurring revenue or ARR of $420 million, up 33% from a year ago. Our consolidated net dollar retention rate for Q2 was 108%. The rate was 115% for large customers, or those with 1,000 or more employees. Gross dollar retention remained stable, large customer churn was minimal, and growth in multiyear contracts continued during the quarter. This is a testament to the strength of our customer relationships, driven by the clear value and impact that Udemy provides to help them achieve their strategic outcomes. However, we do expect some pressure to continue on net dollar retention, as some companies remain hesitant to move forward with expansions and upsells during this unpredictable macroeconomic environment. The strong Udemy Business growth was slightly offset by a 2% year-over-year decline in Consumer segment revenue, which included a negative 3 percentage point impact from FX. We continue to be encouraged by the vibrancy of our marketplace, which fuels the powerful flywheel effect that has the ability to increase customer engagement and reduce acquisition costs over time. Traffic was up 8% year-over-year during Q2 to 34 million unique visitors, despite spending significantly less on performance marketing than we did a year ago. More than 80% of learners enroll in courses to develop professional skills, which creates a healthy funnel of leads for Udemy Business. Also, attracting instructors organically to create courses continues to be a strength. As a result, we saw an 11% year-over-year increase in courses in the Udemy catalog, with nearly 5,000 new courses added each month. As we move down the P&L, note that all financial metrics are non-GAAP unless stated otherwise. Q2 gross margin was 59%, a 100 basis point improvement from Q2 2022, driven by the continued revenue mix shift to Udemy Business since content costs as a percent of revenue are lower for that segment. Udemy Business accounted for 57% of total revenue in Q2, which represents a meaningful mix shift from 49% a year ago. With nearly 15,000 Udemy Business customers and growing, this mix shift is expected to continue toward our long-term target of approximately 75% of revenue. Total operating expense was $108 million or 61% of revenue and 500 basis points lower than Q2 of last year. Sales and marketing expense represented 39% of revenue, down 200 basis points year-over-year. R&D expense was 13%, flat compared with the same period last year. And G&A expense was 9%, down 300 basis points compared with last year. On the bottom line, the net loss in the quarter was approximately $1 million or negative 1% of revenue. Adjusted EBITDA was approximately $2 million or positive 1% of revenue, which represents a 700 basis point expansion year-over-year and 400 basis points better than our high end of the guidance range. This was another major milestone for Udemy, as it was our first time showing positive adjusted EBITDA since our IPO. The better-than-expected adjusted EBITDA result was primarily driven by revenue outperformance and our disciplined approach to driving operational efficiency throughout the organization. We continue to maintain financial flexibility that allows us to make opportunistic investments that can accelerate or enhance our strategy and returns. Moving on to key cash flow and balance sheet items. We ended the quarter with $469 million of unrestricted cash, cash equivalents, restricted cash, and marketable securities. Free cash flow for the quarter was positive $10 million due to improved collections timing and lower expenses. Now turning to our outlook for Q3 and full year 2023. During the second quarter, we did not see any signs that the macro environment is improving. Within Udemy Business, we are seeing further sales cycle elongation and additional layers for deal approvals. We are also seeing smaller deal sizes, as companies optimize their budgets during this time of uncertainty. As we continue to adapt and manage the business through this unpredictable macroeconomic environment, there are challenges that ultimately may impact our results in the near term. With that in mind, we expect Q3 revenue to be between $176 million and $180 million. Assuming foreign currency exchange rates remain constant, FX is expected to negatively impact Q3 year-over-year total revenue growth by approximately 2 percentage points. Due to the continued macro-related dynamics I just mentioned, we now expect Udemy Business growth in the near term to be pressured more than we had originally anticipated. As a result, we currently believe a 2023 Udemy Business year-over-year revenue growth rate in the low 30s is achievable versus our previous view of mid-30s. On the bottom line, we anticipate Q3 adjusted EBITDA margin of negative 0.5% to positive 1.5%. Looking ahead, we are on track to deliver a profitable second half of the year, and now expect Q3 adjusted EBITDA to come in stronger than Q4 due to the better-than-expected consumer performance in the second quarter and result in Q3 revenue recognition. For the full year, we are narrowing our range on revenues to be between $712 million and $720 million, which still anticipates 16% year-over-year growth at the midpoint. That growth includes an estimated three percentage point negative impact from FX assuming no further changes in rates. For full year 2023 adjusted EBITDA margin, we currently expect between negative 1% to breakeven or a 750 basis point expansion at the midpoint compared to 2022. Looking ahead, while we do not plan to provide formal 2024 guidance until our Q4 2023 earnings call, we'd like to provide color on how we are thinking about the business heading into next year. As a reminder, at our November 2022 Investor Day, we shared that we thought we would be able to drive 23% to 25% total revenue growth in 2024. Due to the deterioration of the macro environment since that time, we now believe our total 2024 revenue growth will be lower than the range we had provided. That said, for full year 2024, we continue to believe Udemy Business will represent more than 60% of total revenue. Non-GAAP gross margins will be 58% to 59%. And we absolutely remain committed to delivering positive adjusted EBITDA for the full year of 2024. It is important to note that while we are adapting in real-time and navigating some short-term obstacles, we feel confident that the long-term opportunity available to Udemy is as strong as ever. In closing, Udemy delivered a solid performance in an uncertain environment. Our results illustrate the agility in our business model. We beat expectations on both top and bottom-line, delivered more than $100 million in Udemy Business revenue, and reported our first quarter of positive adjusted EBITDA as a public company, ahead of plan. The foundation we are laying today is expected to yield sustainable recurring revenue growth and generate attractive profit and cash flows over time. We look forward to continuing to deliver value to all of our stakeholders and updating everyone on our progress. So with that, we'll open up the call for your questions, Moderator?

Hi. Thanks for taking my question, and congrats on a nice quarter. Maybe just starting on the guidance you just provided, especially as we think about fiscal 2024. As you think about what type of investments might need to be made to reinvigorate the growth rate in Udemy Business going into next year. How do you factor that? And I guess, around the targets for still being adjusted EBITDA breakeven into next year? Do you feel like the run rate of where you're investing there right now is enough to sort of help drive that growth as the market recovers, or do you feel like new investments will be required?

Hi, Ryan, thanks for the question. So as you can see, like many companies, we are currently adapting to a very dynamic environment. That being said, we feel good about the investments that we've made to-date in our go-to-market team and also in our product. And we're committed to delivering an EBITDA-positive full 2024, and that takes into consideration a range of outcomes based on what the macro does and the investment that we would need to make from a go-to-market perspective in order to achieve those outcomes.

I'll add, Ryan, real quick that, as soon as we see the macroeconomic environment improving and the impact on our sales cycle elongation coming back to a more normal cycle time, we absolutely are going to lean in and start investing in go-to-market growth. And so as soon as that happens, we will trigger that. And as you just alluded to, whether it be the back half of this year or next year, we're not sure when that's going to happen. But when it does, we will absolutely move.

I appreciate the insights about the evolving environment in enterprises regarding the shift towards skills-based learning. I'm curious about the impact this will have on how organizations allocate their spending in this context. Do you believe this shift towards skills-based learning will accelerate consolidation trends or perhaps create a new funding environment for learning and development spending focused on skills-based learning?

It's a good question, Ryan. And we're already seeing that play out now. And I'll give you a couple of examples. Unilever graciously let us talk about it. Significant expansion with Unilever this past quarter was driven by their intent to reskill and upskill their entire workforce to 'future-fit' their organization with the skills necessary for them to achieve their organizational objectives. They want to get this done by 2025. In addition to that, they've selected us to support their digital university program, which they've just launched this past year in accordance with their focus around skills development. And so this is real; it's happening in real-time. And we're seeing examples of this and wins reflected in the commitment organizations have in shifting from long-form learning and degrees to skills that can be applied now to get work done. And in fact, interestingly enough, as we're preparing for the call, the White House this week came out with a report on a National Cyber Workforce and Education Strategy. And I'm just going to read a couple of lines that are relevant here: a skills-based approach is critical to connect more Americans to good careers. They should compete for jobs based on what they can do rather than merely credentials. So we're seeing it pretty much from all sectors—the federal government, we're seeing it from customers, we're hearing it from employees. And so this is a massive secular shift that we're seeing that we're on the front end of, that is not only going to drive— that plays to our favor, and it's going to drive organizations to us based on our marketplace and our unique position that we have to keep up with the pace of change and aid them in developing the skills necessary for them to stay up with the technological advancements that are coming at us in real-time. We, obviously, know what's going on with generative AI. And we saw a couple of key wins just to add briefly—just to add a couple of key wins this last quarter from large multinational enterprises that told us they selected us because of the breadth and depth in our marketplace around AI. These organizations are focused on upping the digital literacy across their organizations, but specific to AI. And they need to make investments in our platform and us as a long-term strategic partner as a result. So it's playing out right now, Ryan, and we're on the front end of a big trend.

Great. Good afternoon. This is Connor Passarella on for Terry. First question maybe a little bit more high level just on the recent executive hires, Chief Product Officer, Chief Marketing Officer. I guess, how do you see the evolution of the platform from a product and messaging standpoint evolving as you continue to position yourself to take a skills-based platform approach to learning with these executives?

Yeah, it's a good question. Thank you for it. Without question, that is the case. And we saw an opportunity as we're looking forward and projecting from a strategic perspective, the capability we need to have in our business to deliver the value and impact to our customers, and that really led us to bring on Genefa and Prasad. Prasad comes with a tremendous amount of depth and capability around AI. At the company he was just with, he rearchitected their entire platform founded based on generative AI in terms of the rearchitecting of that. And without question, bringing him in to help do the same thing here, both in terms of how we get operational leverage and embedding AI in how we run our business, as well as how we develop products and the value that that product is going to have externally on customers as we move forward and better understand how we can leverage AI to improve the overall learning experience. And then on the marketing side, we really have not invested historically in building Udemy into a global brand that everybody is well aware of and understand how we can help them as an individual, a team, or an organization transform lives through learning, whether it be their life or the lives of the individuals in their organization. And Genefa got just a tremendous relevant background and experience that we can't be more excited to have in our business now to help carry us forward, not only helping to build the brand but to optimize our go-to-market motion as we come out of this economic downturn, step on the gas, and really start scaling on a global basis. So both executives are going to have a significant impact on our ability to take the next step in our evolution of realizing our vision to transform lives through learning.

Hi. Thanks for taking my questions. So I guess, we're seeing kind of GDP growth accelerate in the US, at least hold up a lot better than we all anticipated. I guess it's not really accelerating. And you combine that with, seems like, every company making AI their number one priority. So I guess, like what specifically in macro is leading to the weakness? Is it just like L&D not being as mission-critical as we thought it was going to be in a post-pandemic world? So it seems like you guys are very well positioned to capture this unique moment in time where AI is just beginning to kind of reverberate through enterprises, and they need skills for that. So like, there should be more, I feel like a tailwind for you guys. And I know you talked about demand on the platform minutes for ChatGPT and AI. But I guess, how is that not translating into more kind of enterprise demand?

Hi, Brett, thanks for the question. We actually are seeing it translate into enterprise demand. We had a couple of large wins, one in particular with a European engineering and technology firm that purchased our platform, if you will, or selected us as their partner specifically for upskilling across the organization, but embedding AI is a critical component of that buying decision based on the breadth and depth of the AI content that we have on the platform. And there were a number of those. So we are seeing it impacting our ability to win in the enterprise. But now, let me just take a step back, and talk a little bit about what's going on in the business that I believe will help answer this question. The top funnel for us is extremely encouraging in terms of pipe generation, lead generation into the top of the funnel. But what we are seeing is some sales cycle elongation that we alluded to just a few minutes ago. And that's a macro circumstance, if you will, that we know is short-term, but it's impacting our ability to move deals through the pipeline and get those deals closed. And it is a timing situation. I want to make sure that everybody clearly hears that from us is that we strongly believe that this is timing-based on the fact that customers continue to tell us that the importance of upskilling and reskilling has never been higher in organizations. We're not seeing a material decrease in budget per head allocated to upskilling and reskilling. That may be happening with respect to broader education. We're not seeing that or hearing that with respect to upskilling and reskilling. But what is happening is what CFOs around the world have been doing, including our own, which is making sure that they're keeping a close watch on what's happening from a macro and geopolitical perspective and being more conservative than we've seen in the past, with respect to allocating spend. We know that's going to change at some point in time. We see the same indicators that everybody else is seeing, that we think this is going to be a soft landing, and that could start to have a positive impact sooner than later. But sales cycle elongation and timing is really the reason why we're seeing a little bit of what we're seeing on the ARR side. But we strongly believe this is short-term and that it's going to change, like you all are alluding to, as soon as the macroeconomic climate improves, which could be sooner than later.

Yes, thanks for the question. Our gross dollar retention has remained stable. And so really what you're seeing is the same thing that we're seeing across the board: these longer sales cycles are impacting the speed at which we're expanding and upselling. But again, the long-term opportunity hasn't changed. When the macro improves, we expect sales cycles to normalize and net dollar retention to return.

Hey guys. This is Noah from JPMorgan. Just a quick question with respect to the macro environment. Are you seeing; did you see maybe like a sequential step-down in the macro environment potential incremental pressure? Just want to get a sense of whether or not the elongation of sales cycles is that increasing on a sequential basis? And maybe just what you've kind of seen through July?

Yes, I'll take that. So, we did see sales cycles further elongate in the second quarter, and we do expect that to continue in the back half of this year and potentially into the first half. So, what we expect to see is from an ARR perspective growing at a fairly similar amount quarter-over-quarter until the macro starts to come back, the sales cycles come back down, and we'll start seeing increases in productivity from our sales team.

Yes, thanks for the question. On the international expansion side, we continue to see our New Ventures division operate at a very high level. Japan continues to be one of our fastest-growing countries. Our partner, Benesse, there continues to perform at a very high level. And from a productivity standpoint, I couldn't be happier with what we're seeing there. One data point that I think is relevant is we're now in over 60% of the NIKKEI 225. So we're seeing further expansion into the Japanese market. We had a major event there this last quarter. We effectively oversold the event in terms of the interest in what we're doing as far as upskilling and reskilling and our ability to help organizations in-country. So, again, very happy with what we're seeing there. And we've taken that model and we ported that model to Korea, Vietnam, and in China, and we're seeing very similar traction and trajectory in Korea, Vietnam, and China much earlier. So, it's early days there. But Korea had a really nice quarter as well. So, I feel really good about the investments in Asia-Pacific on that front. Additionally, our partnership with AWS also had international impact. This last quarter, we had multiple six-figure deals closed through the partnership with AWS. And we also saw something that was a bit of a surprise— a surprise, obviously, to the good when I explain what it is, which is we had a number of deals that for a variety of different reasons were stalled. Budget potentially was being reevaluated. And when we introduced the AWS partnership and explained that their retained committed budget against the AWS partnership to be allocated towards Udemy, it unlocked these deals, and one of them was a $500,000 annual contract value deal with a large financial services organization, and we saw a number of these. So, couldn't be more excited about the momentum we're starting to see with Amazon, and their commitment to the partnership is equally exciting as the impact on customers and our ability to extend reach around the world. So, this is just one example. So, yes, we're seeing meaningful traction in both areas. And Latin America as well. We continue to see our partners in both Brazil and Mexico expand and accelerate in market as we're fueling their growth. So, internationally, we feel good about what we're seeing.

Taking my questions. First one here wanted to dig in a little more on the Badging and specifically, how important it could be to enterprise customers to be able to provide skills badges to employees. And just thinking about it from an employer's perspective, you positively might get more visibility into skills within your organization, but it could also arguably make your employees to get badges more marketable if they wanted to move to another company. So just curious if that's ever a concern you hear, or does it kind of seem like providing badges and these kinds of skills pathways will become broadly accepted. If employers don't offer them, it could hurt their ability to recruit talent. Just curious what you're hearing in conversations on this front, although I know it's really early.

Yeah, Steve, thanks for the question. It is early. But I believe the short answer is I believe the latter is how it's going to play outthat it is going to be more of a standard and that if employers and organizations don't offer validation in the form of badging and certifications, they're going to be a bit of an outlier. So I believe this soon is going to be a standard in most organizations. But as we talked about, we couldn't be more excited about the Integrated Skills Framework that we're bringing to market and the impact we're already starting to see it have on our ability to win deals. I just mentioned, we're winning business right now as a result of the initial capability that we've launched, as well as what's to come. And what's to come is probably as if not more exciting than what we've already got out there. Right now, organizations have the ability with the first phase to understand the skills that are being acquired and skills benchmarks, how their organization stacks up against other organizations in a particular marketplace or vertical. But what's coming is the ability to identify skills gaps within the organization and address those skills gaps with pre-built paths that are going to enable them. It's really kind of completing the circle, if you will, or the flywheel that they need to continue to accelerate as far as their ability to keep up with the pace of change and upskill and reskill their employees, to enable them to reach the outcomes they're trying to achieve as an organization. We've done a tremendous amount of work with our customers, advisory councils, and the like. And we have a strong signal from our customers and everybody that we work with that this is exactly what they need in a hypercompetitive world, not just today but tomorrow to be able to execute their strategy. So I feel really good about the early impact. We feel really good about the response from the marketplace and feel even better about where we're going and what's to come.

Great. Thanks for the question. Apologies if this was asked already, but was hoping you could give an update on your federal business. And then also, I was wondering if there's an opportunity to take these new badging initiatives and initiatives around skilling into schools, like into the academic world, in addition to just the business world. Is that something on the radar? Like schools acknowledging that there might be learning gaps in preparing their students for jobs or careers could bring Udemy and this new offering to its students.

Hi, Josh. Thanks for the question. I'll start with the last one first. With respect to schools and the opportunity there, I very much agree that there is an opportunity for us to explore. We have not done that to date in terms of doing the diligence and spending the time to understand how we could best serve schools in this capacity. Not to say that it's not an opportunity for us going forward and something we may look at. We just haven't made it a focus to date. So, no progress to report on that. As far as government business, we did—and we continue to invest in the government sector, there's no doubt. Can't talk about a lot of what we're doing there, but we did have a significant win in this last quarter with a branch of the US government that is very focused on skilling. I mean just coming back to skilling. And we have got a large contingent of folks in the organization that are contractors in addition to the folks that are government employed. And we're doing some very interesting things there. I just can't talk a lot about it for probably obvious reasons. But we continue to invest in the government segment and we continue to see steady progress there. And Sarah, I don't know if there's anything you want to add?

No, that sounds good. Thanks, Josh.

Great. Thanks for taking our question. I have another question on badging. Greg, wanted to get your thoughts on just the adoption pace of this product. I know the macro currently isn't the most favorable, but just given how in-demand skills are and the increasing need for learners to validate and showcase their skills, do you foresee like a faster adoption of this product versus your other modules that you have? Just curious on your thoughts there.

Yes, we do. Thanks for the question. We are already seeing that now because there's pent-up demand candidly for validation in the form of badging and certification. It's a concept that's been out in the market for some time now. We strongly believe that our approach is the right approach to enabling organizations to understand how they need to be executing against the skills-based economy opportunity. And yes, we fully expect the adoption to be faster than what we've seen in some of our other products for those reasons.

Yes, thanks for the question. The one normal seasonality step-up that we see from an OpEx perspective is in the fourth quarter around our biggest promotion cycle in the marketplace, for Black Friday and Cyber Monday. The other thing that's happening is, if you're referring to our Q3 EBITDA being higher than our Q4, that is due to the overperformance of our Consumer business in the second quarter, that a lot of that revenue gets recorded in the third quarter. And so where we previously expected EBITDA to grow, we expect it to actually decrease slightly on a sequential basis, but we will be profitable for the back half.

I'd just like to thank everybody for joining the call, and we look forward to speaking with you again in November. Have a great rest of the day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.